No Matter Who Wins On 11/6, Disgruntled Americans Will Move To...Sweden

Kyle Smith
, ContributorI write about economics, politics, media, business and film.Opinions expressed by Forbes Contributors are their own.

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Just before the election, at the moment of maximum crazy, you can expect to hear one celebrity or another declaring, “That’s it. If my candidate loses, I’m leaving the country....” It’s easy to imagine Democrats completing the sentence “...and moving to Sweden.” As for where demoralized Republicans might want to move, how about ...Sweden?

True, Sweden has much higher taxes and spending than the U.S. On the Heritage Foundation’s index of economic freedom, it ranks 21st, well behind the U.S. at no. 10. On a scale of one to 100, its government spending gets a woeful rating of 8.8 based on 55 percent of GDP coming from the public purse, whereas the U.S. earns a mediocre 46.7. Sweden’s top income tax rate is 57 percent.

However, Sweden is sticking to a fiscal austerity program that has coincided with a rapidly growing economy. In business freedom, Sweden posted a blockbuster rating of 94.6, four points better than the U.S. And if anything, the business climate is only going to grow more sizzling in this part of Scandinavia. The Swedish prime minister has recognized the basic truth that wealth has to come from somewhere before it can be redistributed, so in his next budget he proposes a cut in corporate taxation from 26.3 percent to 22 percent, while the U.S. rate is stuck at 35 percent and demagogues screech about “heartless corporations,” “fairness” and punishing the successful as an act of “economic patriotism.”

Sweden has been advancing rapidly since its disastrous 25-year experiment with Socialism led to a change of course in the early 1990s. Since 1993, while cutting its debt from 73 percent of GDP to 37 percent, its economy has been growing at an impressive 2.8 percent a year -- slightly ahead of the U.S.A.’s 2.5 percent. Per capita GDP hit a low of 72 percent of U.S. GDP in the 1990s, but has since been skyrocketing and now stands at nearly 84 percent of U.S. GDP.

Swedish austerity is freeing up more and more of the private sector’s wealth creation engine while the U.S. goes in the opposite direction, spending itself deeper into debt and allowing more and more of GDP to be tied up in the inefficiencies of the public sector. To this information, Paul Krugman has responded with a bizarrely irrelevant chart emphasizing a trivial detail that he hopes will delude us into thinking that it’s the increasingly profligate U.S., and not the increasingly stingy Sweden that has been relatively more austere in recent years.

Sweden’s colorful, ponytail-sporting finance minister Anders Borg is one of the few economic thinkers in Europe who understands the problem with Keynesian stimulus measures is that, even if they provide a small temporary economic buzz, they leave you with a hangover of malinvestment, of resources placed where central planners want them rather than where the market says they belong. Hire an unemployed person to be a government form-filler or poet and you’re simply putting off the day when he’ll have a real job that meets real demands.

Despite mostly avoiding the bank crisis that plagued so many countries, Sweden suffered a sharp contraction after the economic meltdown -- a 5 percent drop in GDP in 2009. But the country was running a budget surplus before that, and a continuing tight fiscal policy has not only not caused a Keynesian disaster, but has accompanied a strong rebound. Sweden grew 5.8 percent in 2010 and four percent last year, though growth has slowed to 0.4 percent this year. Borg’s next move? More tax cuts to free up spending power, not more government. Projected growth is three percent next year. “When individuals and families get to keep more their income,” reasoned a statement accompanying the government’s budget, “their independence and their opportunities to shape their own lives also increase.” That sounds like the opposite of Keynesianism. It sounds like common sense.